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Textainer Group Holdings Limited Reports Fourth-Quarter and Full-Year 2019 Results

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HAMILTON, Bermuda , Feb. 11, 2020 /PRNewswire/ -- Textainer Group Holdings Limited (NYSE: TGH; JSE: TXT) ("Textainer", "the Company", "we" and "our"), one of the world's largest lessors of intermodal containers, today reported financial results for the fourth-quarter and full-year ended December 31, 2019 .

Key Financial Information (in thousands except for per share and TEU amounts) and Business Highlights:


QTD



Full-Year



Q4 2019



Q3 2019



2019



2018


Lease rental income (1)

$

151,555



$

155,848



$

619,760



$

612,704


Gain on sale of owned fleet containers, net

$

3,134



$

6,092



$

21,397



$

36,071


Income from operations

$

64,579



$

53,487



$

222,684



$

194,426


Net income attributable to Textainer Group Holdings Limited common shareholders

$

28,782



$

10,578



$

56,724



$

50,378


Net income attributable to Textainer Group Holdings Limited common shareholders per diluted common share

$

0.50



$

0.18



$

0.99



$

0.88


Adjusted net income (2)

$

10,977



$

12,950



$

55,375



$

51,471


Adjusted net income per diluted common share (2)

$

0.19



$

0.22



$

0.96



$

0.90


Adjusted EBITDA (2)

$

113,187



$

118,254



$

464,315



$

443,090


Average fleet utilization


96.4

%



97.3

%



97.4

%



98.1

%

Total fleet size at end of period (TEU)


3,500,812




3,557,466




3,500,812




3,354,724


Owned percentage of total fleet at end of period


85.4

%



80.7

%



85.4

%



78.9

%



(1)

"Lease rental income" includes both owned and managed fleet lease rental income. Q3 2019 amount has been adjusted to include a $1,183 reclassification from trading container sales proceeds, with no effect on the income from operations, net income and adjusted net income.



(2)

"Adjusted net income" and "Adjusted EBITDA" are Non-GAAP Measures that are reconciled to GAAP measures in section "Reconciliation of GAAP financial measures to non-GAAP financial measures" below. Section "Reconciliation of GAAP financial measures to non-GAAP financial measures" provides certain qualifications and limitations on the use of Non-GAAP Measures.

 

  • Net income of $28.8 million for the fourth quarter and $56.7 million for the full year. These figures include a $14.0 million gain recorded during the fourth quarter related to a cash distribution from the Hanjin bankruptcy estate;
  • Adjusted net income of $11.0 million for the fourth quarter, or $0.19 per diluted common share, as compared to $13.0 million , or $0.22 per diluted common share in the third quarter of 2019. Adjusted net income of $55.4 million for the full year, or $0.96 per diluted common share, as compared to $51.5 million , or $0.90 per diluted common share in the prior year;
  • Adjusted EBITDA of $113.2 million for the fourth quarter, as compared to $118.3 million in the third quarter of 2019. Adjusted EBITDA of $464.3 million for the full year, as compared to $443.1 million in the prior year;
  • Utilization averaged 96.4% for the fourth quarter, as compared to 97.3% for the third quarter of 2019. Utilization averaged 97.4% for the full year, as compared to 98.1% for the prior year;
  • Container investments of approximately $28 million during the fourth quarter, for a total of $739 million for the full year. In addition, we also acquired a container investment company named Leased Assets Pool Company Limited ("LAPCO") on December 31, 2019 . LAPCO's assets consisted primarily of approximately 165,000 TEU of containers previously part of our managed fleet;
  • Repurchased approximately 638,000 shares and 879,000 shares of common stock during the fourth quarter and the full year, respectively, under the share repurchase program authorized on August 29, 2019 ; and
  • Commenced a secondary, or dual, listing of Textainer's common shares on the Main Board of the Johannesburg Stock Exchange ("JSE") on December 11, 2019 .

"Textainer achieved solid results in a challenging operating environment, delivering stable lease rental income of $619.8 million , Adjusted EBITDA growth of 4.8%, and adjusted net income growth of 7.6% during the full year 2019.  We leased out over 400,000 TEU during the year, most of which was new production leased at attractive yields with double-digit returns related to specific market opportunities captured earlier in the year. Average utilization for the year remained high at 97.4%, and at year-end, we owned approximately 85.4% of the total fleet, which stood at 3.5 million TEU," stated Olivier Ghesquiere , President and Chief Executive Officer of Textainer Group Holdings Limited.

Ghesquiere continued, "While we are pleased with our performance for the year, our fourth quarter results reflect the continued atypical lull in market activity.  Accordingly, fourth quarter lease rental income of $151.6 million , adjusted EBITDA of $113.2 million , and adjusted net income of $11.0 million all decreased modestly as compared to the third quarter."

Ghesquiere concluded, "We believe the market is poised to turnaround in the second half of the year, driven by an expected return of seasonal demand, as most elements of our business remain positive. Favorable fundamentals include low turn-in activity, high utilization, reasonable inventory levels, and a recent increase in container prices. We remain focused on improving our business to be best-in-class through our cost control initiatives and other efficiency investments such as improvements in our IT systems and continued optimization of our capital structure."

Fourth-Quarter and Full-Year Results

Lease rental income decreased $4.3 million from the third quarter of 2019, largely due to a decrease in utilization and fleet size. Lease rental income for the year increased $7.1 million from 2018, largely due to an increase in fleet size, partially offset by lower utilization and average rental rates. 

Trading container margin increased $0.8 million from the third quarter of 2019 and for the year increased $3.9 million from 2018, due to an increase in sales volume, partially offset by a reduction in per unit margin.

Gain on sale of owned fleet containers, net, decreased $3.0 million from the third quarter of 2019 and for the year decreased $14.7 million from 2018, driven by a reduction in the average gain per container sold and a slight decrease in the number of containers sold.  While average gains per container sold decreased, the resale container price environment still remains favorable. 

Direct container expense owned fleet was flat from the third quarter of 2019 in spite of a slight decrease in utilization. Direct container expense owned fleet for the year decreased $8.0 million from 2018, resulting from a reduction in repositioning expense, maintenance expense and military sublease expense, partially offset by higher storage costs from lower utilization.

Depreciation expense decreased $1.5 million compared to the third quarter of 2019. Depreciation expense for the year increased $10.9 million from 2018, primarily due to an increase in the size of our owned depreciable fleet.

General and administrative expense was flat from the third quarter of 2019. General and administrative expense for the year decreased $6.2 million from 2018 mainly due to a decrease in compensation costs. The third quarter of 2018 included $2.4 million in costs associated with departing senior executive personnel.

Bad debt recovery was $0.6 million in the fourth quarter of 2019, primarily due to the improved financial conditions for certain lessees. Bad debt expense for the year was $2.0 million , which included $2.9 million to fully reserve for a non-performing lessee in 2019.

Gain on insurance recovery and legal settlement for 2019 and 2018 amounted to $14.9 million and $8.7 million , respectively. The 2019 figure includes a $14.0 million cash distribution from the Hanjin bankruptcy estate received during the fourth quarter of 2019. The 2018 figures include an insurance settlement associated with the Hanjin bankruptcy for insurable costs including primarily unrecovered containers and incurred container recovery costs, net of the insurance deductible.

Gain on settlement of pre-existing management agreement for 2019 amounted to $1.8 million which related to the termination of the container management agreement in conjunction with our acquisition of LAPCO.

Interest expense decreased $2.5 million compared to the third quarter of 2019, primarily due to a decrease in interest rates. Interest expense for the year increased $14.8 million from 2018, primarily due to a higher average debt balance, partially offset by a decrease in interest rates. Realized (loss) gain on derivative instruments, net, changed from a $0.2 million gain in the third quarter of 2019 to a $0.8 million loss in the fourth quarter of 2019. Realized gain on derivative instruments, net, for the year decreased $3.3 million from 2018. The change from gain to loss in the quarter and the decrease in gain in 2019 was primarily due to a decrease in interest rates.

Unrealized gain (loss) on derivative instruments, net, was a gain of $2.9 million for the fourth quarter of 2019 and a loss of $15.4 million for the year, resulting from an increase and a decrease, respectively, in the forward LIBOR curve at the end of the respective period end which increased and reduced, respectively, the fair value of the current interest rate derivatives. Textainer uses interest rate derivatives to manage interest rate risk and intends to hold these derivatives until maturity. Changes in the fair value of derivatives result in non-cash adjustments to their carrying value that get recorded through net income for the portion of our derivatives not designated under hedge accounting at their inception.

Conference Call and Webcast

A conference call to discuss the financial results for the fourth quarter and full year 2019 will be held at 5:00 pm Eastern Time on Tuesday , February 11, 2020. The dial-in number for the conference call is 1-877-407-9039 (U.S. & Canada ) and 1-201-689-8470 (International). The call and archived replay may also be accessed via webcast on Textainer's Investor Relations website at http://investor.textainer.com .

About Textainer Group Holdings Limited

Textainer has operated since 1979 and is one of the world's largest lessors of intermodal containers with more than 3.5 million TEU in our owned and managed fleet. We lease containers to approximately 250 customers, including all of the world's leading international shipping lines, and other lessees. Our fleet consists of standard dry freight, refrigerated intermodal containers, and dry freight specials. We also lease tank containers through our relationship with Trifleet Leasing and are a supplier of containers to the U.S. Military. Textainer is one of the largest and most reliable suppliers of new and used containers. In addition to selling older containers from our fleet, we buy older containers from our shipping line customers for trading and resale. We sold an average of approximately 140,000 containers per year for the last five years to more than 1,500 customers making us one of the largest sellers of used containers. Textainer operates via a network of 14 offices and approximately 500 independent depots worldwide. Textainer has a primary listing on the New York Stock Exchange (NYSE: TGH) and a secondary listing on the Johannesburg Stock Exchange (JSE: TXT). Visit www.textainer.com for additional information about Textainer.

Important Cautionary Information Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of U.S. securities laws. Forward-looking statements include statements that are not statements of historical facts and may relate to, but are not limited to, expectations or estimates of future operating results or financial performance, capital expenditures, introduction of new products, regulatory compliance, plans for growth and future operations, as well as assumptions relating to the foregoing. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "could," "expect," "plan," "anticipate," "believe," "estimate," "predict," "intend," "potential," "continue" or the negative of these terms or other similar terminology. Readers are cautioned that these forward-looking statements involve risks and uncertainties, are only predictions and may differ materially from actual future events or results. These risks and uncertainties include, without limitation, the following items that could materially and negatively impact our business, results of operations, cash flows, financial condition and future prospects: expectation of future market activity; market turnaround with organic demand;  impact of political and economic factors and international trade; our future financial flexibility; and other risks and uncertainties, including those set forth in Textainer's filings with the Securities and Exchange Commission. For a discussion of some of these risks and uncertainties, see Item 3 "Key Information Risk Factors" in Textainer's Annual Report on Form 20-F filed with the Securities and Exchange Commission on March 25, 2019.

Textainer's views, estimates, plans and outlook as described within this document may change subsequent to the release of this press release. Textainer is under no obligation to modify or update any or all of the statements it has made herein despite any subsequent changes Textainer may make in its views, estimates, plans or outlook for the future.

Textainer Group Holdings Limited
Investor Relations
Phone: +1 (415) 658-8333
ir@textainer.com

...

TEXTAINER GROUP HOLDINGS LIMITED AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

Three Months and Years Ended December 31, 2019 and 2018

(Unaudited)

(All currency expressed in United States dollars in thousands, except per share amounts)



Three Months Ended December 31,



Years Ended December 31,



2019



2018



2019



2018


Revenue:
































Lease rental income - owned fleet





$

127,304







$

129,723







$

517,859







$

501,362


Lease rental income - managed fleet






24,251








27,392








101,901








111,342


Lease rental income






151,555








157,115








619,760








612,704


































Management fees - non-leasing






1,767








2,250








7,590








8,529


































Trading container sales proceeds






20,959








6,887








58,734








19,568


Cost of trading containers sold






(18,965)








(5,583)








(51,336)








(16,118)


Trading container margin






1,994








1,304








7,398








3,450


































Gain on sale of owned fleet containers, net






3,134








9,591








21,397








36,071


































Operating expenses:
































Direct container expense - owned fleet (a)






11,760








12,740








45,831








53,845


Distribution expense to managed fleet container investors






22,323








25,341








93,858








102,992


Depreciation expense (b)






66,129








64,801








260,372








249,500


Container lessee default expense, net (a)






149








6,943








7,867








17,948


Amortization expense






517








502